Withdraw, drawdown, sisp? confused

jamesd

Your plan is fine and you can do what you have described. To do it you will need to use the new "flexi-access drawdown" that is expected to become available from 6 April 2015. That allows taking a 25% tax free lump sum then an unlimited amount from the remaining 75% whenever you like.

Some providers do not offer all options and sometimes they confuse people by saying "you can't" of "you're not allowed to" when they should instead be saying "the product you have doesn't provide that feature" or "our policy is not to provide that facility". The remedy in these cases is easy, just transfer the money to a place that offers the features you want to use.

You're being confused in part by the things that are available before 6 April 2015. Those are:

1. Capped income drawdown. Allows drawing up to the GAD limit amount, sometimes expressed as 120% or now 150% of GAD. If you want to you could start to use this now and switch to flexi-access drawdown after 6 April 2015. You can take a 25% tax free lump sum first.

2. Flexible drawdown. Allows drawing an unlimited amount but you must at the time you start it have £12,000 or more of guaranteed income being paid to you in the form of work defined benefit pensions, the state pension and annuities. Previously the requirement was £20,000. You can take the usual 25% tax free lump sum first. If necessary you could qualify for this by claiming the state pension first and also getting your other pensions to get the required income, then defer the state pension, which you can do once after claiming. But this option is made obsolete by the flexi-access drawdown one and it's not worth doing now we're so close to that.

3. Buy one or more annuities. Can take 25% tax free lump sum first.

I suggest that you get started with capped income drawdown now because there is likely to be a lot of initial demand for flexi-access drawdown in the first six months. You'll be able to take out at least the 25% tax free lump sum and in this tax year 7.95% of the rest (assuming you're aged 65 now, use this limit calculator). Then after the new tax year starts you can take another 7.95%. The 7.95% is a per tax year allowance and it goes up with your age or up and down according to the 15 year gilt yield. Then you can switch to flexi-access drawdown without being too inconvenienced by any delays.

When deferring the state pension you get all of the inflation-linked increases between starting deferring and stopping. Then the result of those is increased by the bonus for deferring. So if the basic state pension increased by £15 while deferring you'd get that £15 increase then 10.4% a year of the new value on top for all the years of deferring.

Cash can be held on deposit in many SIPPs or alternatively you can use money market funds, though those pay very little. You could take some risk with a combination of global tracker and strategic bond funds for part of it to make some money at low overall risk. I rather like the mixture in the Invesco Perpetual Distribution fund.

ABN

THANK YOU THANK YOU for such a detailed reply.

Its just dawned on me where part of my problem is. I’m still living in 2014 and was thinking that 2015 was a year away. Part of the problem of getting old and staying at home I suppose.

Will look further into the flexi-access drawdown.

Rather than having to move everything with the associated costs and complications, to start a a flexi-access drawdown I would be happy to wait a few months so that I can jump straight into the flexi-access drawdown as this would seem the simplest straight forward option.

Providing that is that delaying taking my pension until after 65 does not cause any other complications?

Thank you once again.

jamesd

No complications. If you're content to joint the crowd wanting flexi-access drawdown in the first months with the delays that you might experience i agree that it's the least hassle way to go.

mgdavid

ABN wrote: »

........
Rather than having to move everything with the associated costs and complications, .......

to reassure you, there are not normally any costs or charges to transfer a DC pot (stakeholder, personal pension etc) to another provider or into a SIPP. Not really complicated either, as the new provider (or SIPP platform provider) will do the work and just send you some forms to fill in. Once you've learned the jargon it gets easier...